ERIN MINERAL RESOURCES LTD
NIGERIA OVERVIEW
November 2011
INTRODUCTION
NIGERIA’S MINERAL HISTORY
• Exploration for several solid minerals (Sn, Nb, Pb, Zn, Au) goes back more than 100 years.
• Nigeria has previously been globally ranked 6
thin Tin and 1
stin Columbite production.
• Commercial oil was discovered in 1956 and production commenced in 1958.
• Until 1960’s coal and Sn were mined and exported on a large scale and were significant contributors to GDP.
• Apart from coal, mining of minerals and metals was entirely in the hands of private enterprise, with British mining companies dominating.
• Nigeria gained independence from Britain in 1960.
• The solid minerals sector began its’ decline, amplified by the Nigerian Civil
War in the 1960s.
INTRODUCTION
NIGERIA’S MINERAL HISTORY
• Past mining activity has historically covered the Jos Plateau and areas of Enugu State for tin, allied ores and for coal.
• Tin was affected drastically by the fall in world market price and the tin mining becoming more difficult due to the depletion of surface reserves.
• Coal was merely usurped by the more profitable oil extraction.
• During the 60s and 70s the predominantly foreign investors in the mining industry left Nigeria, allowing the industry to declined from large and
medium scale mining to what is now only small-scale and artisanal mining.
INTRODUCTION
NIGERIA’S MINERAL HISTORY
• In 1971 the Government policy on minerals and metals was drastically reviewed.
– The Nigerian Government decided to act as catalyst in the mining sector through the establishment of mining corporations which would use public funds for mining
– The main policy thrust was the rejection of the concept of private-sector-led development of the solid mineral sector
– The Government’s position was that the primary objective of mining policy should be to secure the development, conservation and utilisation of the mineral resources of Nigeria in the best possible manner so as to bring about economic benefit for the largest
possible period, and that there was no reason to suppose that the private investor was the best instrument with which to achieve the objective
– The conclusion was that if prospecting and exploitation of minerals were to remain solely in the private sector, the country would be at a disadvantage
INTRODUCTION
NIGERIA’S MINERAL HISTORY
• This new policy of Government (Indigenisation Decree of 1972) also
resulted in the acquisition of 60% shares in the major expatriate tin mining companies on the Jos Plateau, causing large scale withdrawal of foreign investment in the industry and a downturn in production. With the exit of multinational companies and their expatriate professionals, the bulk of mining operations by the private sector rested on the shoulders of small- scale indigenous miners.
• The Inspectorate Department of the Ministry of Mines and Power (as it
was then known) was ill-equipped and lacked adequate and suitable
manpower to carry out surveillance of the minefields with a view to
ensuring compliance to safety standards and to man the exit points to
identify mineral commodities being exported.
INTRODUCTION
NIGERIA’S MINERAL HISTORY
• Illegal mining and speculative pegging by legal title holders were rife.
• The expected economic advantages that informed the 1971 review of mining policy were never realised.
• In the late 90s the Government then initiated reforms aimed primarily at allowing the private sector to take a pivotal role in the growth of the
sector, reorientation of government from ‘Owner-Operator’ to
‘Administrator-Regulator’, ensuring liberal and transparent access to
mining titles, strengthening institutional and human capacity and
strengthening geological data generation.
INTRODUCTION
ERIN MINERAL RESOURCES LTD
• Erin is an Australian incorporated company engaged in mineral exploration activities, in Nigeria and Senegal. The Company’s operational office is
located in Abuja, the capital of Nigeria.
• Erin holds interests in Tenements covering approximately 2,245 square kilometres in Nigeria and 280 square kilometres in the highly prospective Kedougou gold province, Senegal. It is also developing interests in
Mauritania.
• The Tenements are held principally for their gold potential, however, project generation in Nigeria is focussing on other areas for their base metal, iron ore, tin/tantalum or rare earth potential.
• In Nigeria; Erin has a first mover advantage in areas under-explored that have extensive artisanal Au zones opened up under the new Mining Act.
• In Senegal; Erin has Au mineralisation projects within the Kedougou Inlier
that is host to >45MozAu in recent discoveries.
INTRODUCTION
ERIN MINERAL RESOURCES LTD
INTRODUCTION
ERIN MINERAL RESOURCES LTD
West Africa Geology and Resources
LAW
NIGERIAN MINERALS AND MINING ACT 2007
• The 2007 Act was to be based on international best practices and thus modelled after a number of successful mining jurisdictions.
• The aim of the new Act was to increase investment in the sector, both locally and internationally.
• All mineral resources are vested in the Government of the Federation for, and on behalf of, the people of Nigeria.
• Important features to be included were:
– Enactment of transparent laws, regulations and guidelines – Creation of a favourable fiscal regime
– Setting up of institutional frameworks for the generation, storage and dissemination of geological and mining information
– Transparent access by the public to mining sector information
– Provision of clear safeguards for health, safety and the environment – Rules for the succession and transferability of mining titles
LAW
NIGERIAN MINERALS AND MINING ACT 2007
• Establishment of four (4) new technical units within the Ministry of Mines and Steel Development.
– Mining Cadastre Office
– Mines Inspectorate Department
– Artisanal and Small-Scale Mining Department – Mines Environmental Compliance Department
• Specific provisions were included to attract investment.
– Security of tenure
– Competition for mineral titles based on “first come first served” basis – Application of the principle of “use it or lose it”
– Time limits for granting titles
– Implementation of a Mining Cadastre administration system
– Introduction of Community Development Agreements and Environmental protection and mitigation measures
LAW
NIGERIAN MINERALS AND MINING ACT 2007
• Specific provisions were included to attract investment (continuing).
– Transferability of mining rights
– Exemption of customs and import duty on a list of equipment imported exclusively for mining operations
– Expatriate quota and resident permits for approved personnel
– Permission to retain a portion of foreign earnings in a domicile account – Free transferability of funds
LAW
NIGERIAN MINERALS AND MINING ACT 2007
Description Tax System Comment
Royalty 1 to 3% Low compared with industry
standard of 0 to 5%
Availability of tax holidays No Loss carried forward
Accelerated depreciation Yes 100% on capital investment in year occurred
Deduction of exploration and
other costs Yes 100% cost recovery allowed in year
incurred Remittance of profits and
dividends Yes 100% allowed
Corporate tax 20 to 30% Net Profit Industry standard is 15 to 35% of taxable income
Currency conversion Yes On total profit
Exemption from custom duties Yes On agreed list of equipment
Capital gains tax 10% Industry standard 5 to 15%
LAW
NATIONAL MINERALS AND METALS POLICY 2008
• Aimed to achieve:
– A conducive business environment with the Government acting as motivator/moderator to stimulate private sector investment
– Optimal operation of the private sector industries, producing competitive high quality products
– Robust and functional integrated steel industry – Private sector revenue generation for Nigeria
• Developments include:
– Additional technical departments; Steel and Non-Ferrous Metals Department and Metallurgical Inspectorate and Raw Materials Development Department
– NGSA airborne geophysical survey
– Establishment of private sector processing centres and provision of buying outlets – Privatisation of Government companies (NMC, NCC, etc)
LAW
NIGERIAN MINERALS AND MINING REGULATIONS 2011
• Public release of the regulations occurred in May 2011.
• Prepared in conjunction with private enterprise and industry bodies.
• Focus was to comply with the intent of the 2007 Act. This had been a problem previous attempts to issue the Regulations.
• A number of industry concerns still exist:
– The timing of seeking consent from landowners during the application for a Mineral Title – The MCO to be involved in landowner compensation negotiations rather than acting as
an arbitrator
– Preparation of Environmental Impact Assessments during exploration; this stems from the definition in the Act of “Mining Activities” that includes exploration
– An inappropriate level of investigation (Scoping Study detail) for holders of an Exploration Licence to make application for a Mining Lease
– Lack of recourse by the investor in relation to delays in application/approval processes caused by the Government
• Has responsibility for policy making, administration and regulation of Nigeria’s minerals and metals sector.
• The Ministry was restructured in 2005 to have four (4) technical departments and one (1) service department:
– Mining Cadastre Office – Mines Inspectorate
– Artisanal and Small-Scale Mining – Environmental Compliance
– Finance/Administration
• In January 2007, following the Government’s rationalisation of Ministries, the Steel component of the defunct Power and Steel ministry was added to the former Ministry of Solid Minerals to form the present Ministry of Mines and Steel Development.
ORGANISATIONS
MINISTRY OF MINES AND STEEL DEVELOPMENT
• Two (2) additional technical departments to the new Ministry were created:
– Metallurgical Inspectorate and Raw Materials Development Department – Steel and Non-Ferrous Metals Department
• The Ministry is also responsible for the supervision of a number of
parastatals that have legal mandates to execute specific functions in the industry on behalf of the Federal Government; such as research and development, training and industry capacity building.
ORGANISATIONS
MINISTRY OF MINES AND STEEL DEVELOPMENT
• Mines Inspectorate.
– Overall responsibility for the supervision of industry operations including detailed exploration, evaluation, mine development and production
– Responsible for enforcement of mining laws and collection of revenues
• Mines Environmental Compliance.
– Responsible for the enforcement of global environmental best practices in mining – Functions include: the establishment of environmental procedures and requirements
applicable to mining operations (including exploration); the review of all plans, studies and reports required to be prepared by holders of mineral titles in respect of their environmental obligations under the Act; and the monitoring and enforcement of compliance with all environmental requirements and obligations required by law
• Artisanal and Small-Scale Mining.
– Responsible for the formalisation of the operation of ASM operators and provision of extension services
ORGANISATIONS
DEPARTMENTS – POLICY AND REGULATION
• Mining Cadastre Office.
– Responsible for the administration of mineral titles
– The institution is defined by the Act to be an autonomous institution and the sole agency regarding all matters relating to mineral titles
– The institution is also responsible for interfacing with investors in respect of granting and processing of mineral titles and is responsible for the maintenance of a cadastral atlas and title registers
• Steel and Non-Ferrous Metals.
– Implements the objectives of the National Metals Policy (2008)
– Specific responsibilities include: regulating tariffs on metal commodities and products;
monitoring developments in other sectors of the economy that may have adverse effects on the metals sub-sector and recommending appropriate actions; monitoring and
ensuring compliance by the metals industry operators with environmentally friendly and technically safe operation; and ensuring enforcement of the utilisation of local metal industry products in all government contracts
ORGANISATIONS
DEPARTMENTS – POLICY AND REGULATION
• Metallurgical Inspectorate and Raw Materials Development.
– Responsible for metallurgical regulation and sourcing of mineral raw materials for the metallurgical industry
• Council of Nigerian Mining Engineers and Geoscientists.
– The mandate of this institution is to regulate and control the training and practices of professionals in the extractive industries
– One of its primary responsibilities is to maintain a register of all professionals, including mining engineers, metallurgists, geoscientists and others in related fields, who are to practice the above professions within Nigeria
ORGANISATIONS
DEPARTMENTS – POLICY AND REGULATION
• Nigerian Geological Survey Agency.
– Mandated to “continue to provide geosciences information for the economic, social, and environmental development of the country”, and to “utilise public funds to carry out regional mapping and mineral exploration” to encourage further private participation by investors for detailed exploration and mine development”
– Responsible for the generation of basic geosciences data for investors and the general public
– Is expected to focus on the acquisition, management, storage, interpretation and
communication of geosciences information to promote the country’s resource potential and thus encourage investment in detailed mineral exploration by the private sector
• The Nigerian Institute of Mining and Geosciences.
– Established from the Jos School of Mines to train the requisite manpower for the emerging mining industry
– Its mandate includes: the provision of postgraduate training in mining and geosciences;
short courses in mining, geosciences and extension services; research and development;
and consultancy services
ORGANISATIONS
RESEARCH, DEVELOPMENT AND CAPACITY BUILDING
• The National Metallurgical Development Centre.
– Its functions include the mineralogical appraisal and evaluation of mineral ore samples, flow-sheet development, and development of both conventional and refractory products using indigenous mineral raw materials among others
– Is in line with Government’s intent to continue to support research and development in the minerals and metals sector
• National Steel Raw Materials Exploration Agency.
– This institution came into existence as the Exploration and Mining Division of the defunct Nigerian Steel Development Authority, established in 1971
– It later became a corporate body with its primary mandate is to explore for steel raw materials to meet with the needs of the iron and steel industry
• Metallurgical Training Institute .
– Established to provide adequate and sustainable manpower for the metallurgical industry
– Functions include training of personnel for the iron and steel, and allied industries; and conducting research and development in the field of metallurgy
ORGANISATIONS
RESEARCH, DEVELOPMENT AND CAPACITY BUILDING
• Commercial operations in the sector are characterised by a mix of public and private companies, with the Federal Government gradually
relinquishing control of state owned operators in line with its privatisation policy and ongoing industry reform process.
• Operators can be categorised into either downstream or upstream based on the segment of the value chain in which they operate.
• The downstream sector is characterised by predominantly Government owned companies and newly privatised companies.
• In the upstream sector the majority of private participation is through small-scale mining companies and artisanal mining.
ORGANISATIONS
COMMERCIAL OPERATIONS
• Nigerian Mining Corporation and Nigerian Coal Corporation.
– The NMC was established to develop the metallic and industrial mineral resources other than coal and iron ore
– The NCC had the sole responsibility of developing the nation’s coal resources – The two corporations were wound down in 2005 and are being privatised
• Nigerian Iron Ore Mining Company (Itakpe).
– Charged with the responsibility of exploring, exploiting and beneficiation of the Itakpe iron ore deposit, and to produce concentrate and super-concentrate for the Ajaokuta and Delta Steel companies respectively
– Concessioned in 2005 to Global Infrastructure Nigeria Limited for a period of ten years – However in 2008 this concession agreement was terminated by the Government citing
asset stripping and breach of contract agreements
• Ajaokuta Steel Company Ltd.
– An integrated steel plant which is based on the Blast Furnace/Basic Oxygen Furnace route of steel production
ORGANISATIONS
COMMERCIAL OPERATIONS - DOWNSTREAM
•Ajaokuta Steel Company Ltd. (continued)
–Designed to produce 1.3 million tonnes of cast blooms per annum in the first phase, with inbuilt facility to expand to 2.6 million tonnes and 5.2 million tonnes in the second and third phases respectively
–Steel produced in the first phase was to be processed into long products, while the
additional production from the second and third phases were to be dedicated for flat steel production and capacity enhancements respectively
–The Rolling Mills comprise a Billet Mill, Medium Section and Structural Mill, the Light Section Mill and the Wire Rod Mill
–To date, commercial activities have only taken place in the light section mill, the wire rod mill, the power plant, the engineering workshop complex and the manufacturing end erection base
–The development of this plant has stalled at 98% completion for over two decades
–In June 2003, the company was first concessioned for a 10 year period to SOLGAS Energy Ltd who withdrew from the agreement in August 2004, following which the company was then concessioned for another 10 year period to Global Infrastructures Nigeria Ltd.
–This agreement was terminated by the Federal Government in 2008
ORGANISATIONS
COMMERCIAL OPERATIONS - UPSTREAM
• The Delta Steel Company Ltd.
– A Midrex Direct Reduction integrated steel plant, was built as a turnkey project and commissioned in 1982 to produce 1 million metric tonnes of liquid steel per annum – The plant however only attained a maximum production capacity of 25% in 1985
– Production declined progressively thereafter until 1996 when the plant was finally shut down
– The plant was privatised to Global Infrastructures Nigeria Ltd. in June 2005
• The Inland Rolling Mills
– The 3 inland steel rolling companies located respectively at Katsina, Oshogbo and Jos were commissioned between 1982 and 1983 with installed capacity of 210,000 tonnes of assorted rolled products each
– They have had their share of low capacity utilisation as a result of inconsistent
government polices, inability of Delta Steel Company to supply them billets, dumping and market saturation amongst others
– The companies were privatised in 2004
ORGANISATIONS
COMMERCIAL OPERATIONS - UPSTREAM
• Aluminium Smelting Company of Nigeria (ALSCON).
– The plant has an installed capacity of 193,000 metric tonnes of primary aluminium products per annum
– It is envisaged to export 70% of its products while retaining 30% for domestic consumption
– ALSCON was privatised in 2006 to RUSSAL of Russia
• Other Private Players in the Downstream Sector.
– Aluminium: There are two privately operated rolling mills in the country using imported ingots as feedstock, which supply a range of flat rolled products used by a myriad of industries across the country. There are also aluminium extrusion plants privately operated in the country
– Steel Mills: Several privately owned mini and rolling mills with combined installed
capacities of about 1 million tonnes as well as a number of foundry and forge industries exist in Nigeria
– Makeri Smelting Company Limited
ORGANISATIONS
COMMERCIAL OPERATIONS - UPSTREAM
• Federal and State Governments are primarily responsible for developing and applying the legislative framework, including the provision of
supervisory and regulatory functions.
• State Governments have no direct control over the exploration and exploitation of minerals.
• A number of States have established mineral related departments with the mandate of promoting and monitoring exploration, mineral investment and public awareness.
ORGANISATIONS
STATE GOVERNMENTS
• The Local Government Authorities functions include, but are not limited to, making recommendations to the State on economic planning and
development and ensuring that the interests and traditional values of the community are taken into consideration.
• They are not empowered to enact, repeal or revise any legislation apart from local by-laws.
ORGANISATIONS
LOCAL GOVERNMENT AUTHORITIES
PROMOTION OF THE SECTOR
NIGERIAN GOVERNMENT’S PLAN
Vision 20 2020. Nigeria to become one of the top 20 economies in the world by 2020. Mineral sector seen as critical for this to succeed.
• Pillars (5)
– Quality Geo-science Data – Sustained Mineral Exploration
– Ease of Access to Minerals and Capital – Functional Cross-Sectoral Linkages – Sustainability
• Enablers (2)
– Institutional and Human Capacity – Legal and Regulatory Framework
• The aim is to emulate countries like South Korea.
PROMOTION OF THE SECTOR
NIGERIAN GOVERNMENT’S PLAN
Pillar 1
• Maximum (100%) geological and geophysical mapping coverage by 2020 (20 maps of 1:100,000 pa).
Pillar 3
• Transparent licensing system.
Pillar 4
• Revitalisation of the steel industry.
– Seen as increasing upstream activities (exploration and mining); and – Boosting downstream activities (processing and other sector impacts).
• Utilisation of domestic industrial minerals.
Pillar 5
• Control and strengthen artisanal and small scale mining
PROMOTION OF THE SECTOR
NIGERIAN GOVERNMENT’S PLAN
Enabler 1
• Manpower development for the preparation of BFS.
• Encourage the establishment of Junior Miners and Consultants.
• Establish laboratories to meet international standards Enabler 2
• Stable and effective legal and regulatory framework to all entities in the industry.
• Enhance the fiscal regime to become more attractive to both local and foreign investors:
– Favourable tariff regime – Mining insurance schemes
– Competitive taxation regime, incentives and holidays – Adequate foreign currency facilities
CURRENT STATUS
EFFECTIVENESS OF INITIATIVES
• Institutional.
– Disbanding of the NMC and NCC completed
– Iron and steel development still stagnated; progress incredibly slow
– Establishment of an independent MCO in 2011 (4 years after the new Act)
• Transparency issues still exist in the issuing of mineral titles.
– Public unable to access mineral title information; including coverage and holder details – Cancellation of applications but systems not reflecting changes
• Ongoing delays in mineral title approvals and applications for variations (transfers, renewals, etc)
– Revalidation process
– Moratorium on the issuing of mineral title approvals
• No improvement in Nigeria’s reputation for doing business.
• All of the above have continued to limit investment in the sector.
CURRENT STATUS
EFFECTIVENESS OF INITIATIVES
• State of Stagnation. No medium to large scale mining operations in Nigeria currently. Most activity is by small entrepreneurs and artisans either not licensed or operating outside the parameters of licenses held.
• Steel. Inconsistent Government policies, poorly thought-out Government interventions, undue political interference, corruption, and management incompetence has bedevilled the projects and indeed the entire sub-
sector as all the public steel projects have grossly underperformed despite massive injection of public funds. The issues in this sub-sector have since become intractable leading to the decision by the Federal Government to privatise the publicly owned steel companies in 2003. The privatisation efforts have however yielded little or no benefits and have recently hit a brick-wall with the termination of concessioning agreements entered into for ASCL and NIOMCO. Growth in this sector is currently stagnated as DSC and the three inland rolling mills are currently not functional even as
privately held companies.
POTENTIAL
MINERALS AND METALS ENDOWMENT
• Obtaining reliable data on Nigeria’s mineral endowment is a
fundamental problem. Data gathering capabilities are inadequate and any estimates are highly in-accurate.
• Nigeria supposedly contains solid mineral deposits of economic significance including:
– Metals Gold
Iron ore Cassiterite
Columbite (an ore of niobium and tantalum) Wolframite
Pyrochlore (a solid solution between the niobium end member (pyrochlore), and the tantalum end member (microlite)) Lead-zinc
POTENTIAL
MINERALS AND METALS ENDOWMENT
• Nigeria supposedly contains solid mineral deposits of economic significance including (continued):
– Industrial Coal
Monazite Marble Limestone Clays
Barite
• Nigeria reportedly has “huge” resource potential for Fe, Cu, Al, Sn, Pb/Zn, Au, Ag and Cd.
• Essentially there is a very poor understanding of Nigeria’s actual mineral
endowment.
POTENTIAL
MINERALS AND METALS ENDOWMENT
• Estimates (in tonnes) for some industrial minerals are:
• Estimate confidence in the quoted “Proven Reserves” would not satisfy JORC or NI 43-101 requirements. They therefore could be substantially higher or lower.
Mineral Proven Reserves Annual Demand Production Shortfall
Barite 1,000,000 140,000 10,000 130,000
Phosphate 800,000 180,000 5,000 175,000
Gypsum 1,700,000 220,000 20,000 200,000
Kaolin 30,000,000 250,000 25,000 225,000
Marble 200,000,000 800,000 50,000 750,000
Coal 639,000,000 1,000,000 30,000 970,000
POTENTIAL
SOLID MINERALS OCCURRENCES IN STATES
Mineral States Mineral States
Barite Benue, Cross River,
Nasarawa, Plateau, Taraba, Zamfara
Coal and
Lignite Abia, Adamawa, Anambra, Bauchi, Benue, Cross
River, Delta, Ebonyi, Edo, Gombe, Imo, Kogi,
Nasarawa, Plateau Bentonite Borno, Edo, Kogi, Ogun,
Ondo Columbite Bauchi, Cross River,
Kaduna, Kano, Kwara, Nasarawa, Plateau
Bismuth Kaduna Diatomite Borno, Yobe
Bitumen Edo, Lagos, Ogun, Ondo Dolomite Edo, FCT, Kogi, Kwara, Oyo Cassiterite Bauchi, Cross River,
Kaduna, Kano, Kwara, Nasarawa, Plateau
Feldspar Bauchi, Borno, FCT, Kaduna, Kogi
Clay In all States of the
Federation Flourite Bauchi, Ebonyi, Plateau, Taraba
POTENTIAL
SOLID MINERALS OCCURRENCES IN STATES
Mineral States Mineral States
Gemstones Bauchi, Kaduna, Kogi, Kwara, Nasarawa, Niger, Ogun, Oyo, Plateau, Taraba
Kaolin Akwa Ibom, Anambra, Bauchi, Bayelsa, Ekiti, Imo, Katsina, Kebbi, Kogi, Ogun, Ondo, Plateau, Rivers
Gold FCT, Kaduna, Kano, Katsina, Kebbi, Kogi, Kwara, Niger, Osun, Zamfara
Kyanite Kaduna, Niger
Gypsum Adamawa, Edo, Gombe,
Ogun, Sokoto, Yobe Lead Cross River, Ebonyi, FCT, Plateau, Zamfara
Ilmenite Benue, Cross River,
Kaduna, Plateau Limestone Benue, Cross River,
Ebonyi, Edo, Gombe, Kogi, Ogun, Sokoto
Iron Ore Enugu, FCT, Kaduna, Kogi,
Nasarawa, Zamfara Lithium Kaduna, Nasarawa, Niger, Zamfara
POTENTIAL
SOLID MINERALS OCCURRENCES IN STATES
Mineral States Mineral States
Manganese Katsina, Kebbi, Zamfara Silica Sand Delta, Jigawa, Kano, Lagos, Ondo, Rivers
Marble Edo, FCT, Kogi, Kwara,
Nasawara, Oyo Silver Ebonyi, Kano
Mica Ekiti, Kogi, Kwara,
Nasarawa, Oyo Talc Ekiti, Kaduna, Kogi, Niger Molybdenite Plateau Tantalite Cross River, Ekiti, Kogi,
Kwara, Nasarawa Phosphate Ogun, Sokoto Wolframite Bauchi, Kaduna, Kano,
Kwara, Nasarawa, Niger, Zamfara
Rutile Bauchi, Cross River,
Kaduna, Plateau Zinc Cross River, Ebonyi, FCT, Plateau, Zamfara
EXPECTED CHALLENGES
RESTRICTING INVESTMENT
• Gap between available regional datasets and private investment detailed exploration.
– Nigeria’s mapping coverage remains very low and basic information required for further mineral resource assessment is not yet readily available at optimal scale and coverage – For geological mapping the land area of Nigeria has been divided into 1,324 sheets on a
scale of 1:100,000. Only around 10% of the sheets are completed. The mapping that is available is broadly correct but inconsistent in detail
– The recently completed airborne magnetics and radiometrics survey provides quality data
– The geochemical mapping programme has only completed <10% cells out of the 44 GRN (Global Geochemical Reference Network) cells within Nigeria
– The NGSA has not been consistently availed the desired level of funding to improve national coverage in its regional geological mapping program which has proceeded very slowly as a result
– This has brought about a gap between exploration data and investment which must be bridged to drive growth in the sector
EXPECTED CHALLENGES
RESTRICTING INVESTMENT
• Uncompetitive framework for private sector participation.
– Weak implementation of the stipulations of the 2007 Act and poor compliance with its provisions has significantly undermined the reform programme
– Lack of autonomy in the administration of the mining cadastre system: One of the key policy thrusts of the reform programme is achievement of transparency in the granting of mining titles and permits. This required the setting up of the Mining Cadastre Office (MCO) as an autonomous institution with the responsibility for the administration of mineral titles and the maintenance of the cadastral registers. Until recently the MCO was operating as a Department in the Ministry which significantly eroded investor
confidence. This has been rectified recently with the installing of a Director General for the MCO.
– Continuing problem with investors being confident that the title system is transparent – The lack of a good and reliable title search mechanism that is available to the public also
reduces investor confidence
EXPECTED CHALLENGES
RESTRICTING INVESTMENT
• Uncompetitive framework for private sector participation (continued).
– Lack of access to credit for potential Nigerian investors. Due to the high risk nature of exploration and its associated costs, and the low level of maturity of the industry makes raising finance for mineral resource development a fundamental problem limiting
growth in the industry. The establishment of a Solid Minerals Development Fund was supposed to address the problems for local investors. However, the delay in the
commencement of this fund is affecting investor sentiments. The fund is expected to be utilised for the development of both human and physical capacity in the sector;
equipping mining institutions; supporting extension services to small scale and artisanal mining operations; funding geo-scientific data gathering, storage and retrieval; and providing infrastructure in areas of mining activity
• Other issues affecting investor interest in the minerals and metals sector include:
– Lack of physical infrastructure to support profitable mineral resource exploitation – Absence of an appropriate legislative framework for the metals sub-sector (planned
Metals & Metallurgical Act is yet to materialise)
EXPECTED CHALLENGES
RESTRICTING INVESTMENT
• Other issues affecting investor interest in the minerals and metals sector include (continued):
– Weak enabling environment characterised by policy inconsistency at the highest levels of Government leading to frequent policy reversals, frequent contractual disputes with foreign investors, and high levels of political interference and corruption.
• Absence of effective linkages with other strategic sectors of the economy.
– The inability for Nigeria to utilise demand from one sector to boost production of the other, and vice versa, is a major constrictive factor
– Despite high levels of local demand for steel and a burgeoning infrastructure deficit, the country remains unable to develop its primary and secondary iron and steel industries – Nigeria has failed to take full advantage of the importance of industrial minerals in the
economic development of the country
– Industrial minerals occur in almost every state of the country, and their downstream use in the manufacturing and industrial sectors have high employment potential
EXPECTED CHALLENGES
RESTRICTING INVESTMENT
• Low institutional and human capacity across all segments of the minerals and metals sector.
– Years of underinvestment in capacity building has led to a dearth of quality personnel across all segments of the industry from regulation administration, research, training, to commercial operations
– This problem has tended to undermine the effectiveness of reforms in the sector as the capabilities required to implement and manage change is limited in the key
implementing institutions
• Prevalence of unsustainable practices in mineral resource exploitation.
– These practices can be analysed with respect to their contribution to the degradation of the physical environment and their disruptive effects on the social and economic
configuration of mining communities. Two key considerations are discussed below – Widespread and uncontrolled artisanal activity: dominates mining in Nigeria, and is
estimated to provide rural livelihood to over 500,000 miners. Integration of the current institutional and legislative framework for the industry has been slow and uncontrolled, and unregulated artisanal activities still persist.
EXPECTED CHALLENGES
RESTRICTING INVESTMENT
Nigeria’s ASM sector is also characterised by abject poverty, declining levels of education in mining regions, deteriorating human health conditions and a growing threat of
epidemics, child labour, gender abuse, conflicts, lack of access to fair markets and recourse to smuggling, and lack of access to credit. The continued prevalence of the above significantly threatens sustainable exploitation and management of these mineral resources and inhibits the growth of the sector. The perpetuation of unregulated and uncontrolled artisanal activities has contributed to severe environmental degradation in host areas and though the law made provisions for reclamation, the enforcement of this provision of the law is weak and ineffective.
– Limited revenue flows to mining communities and States from the industry: Federal Government payments to the States (proportion of all fees, rent, royalties and tax revenues collected from mining and quarrying) are not regularly paid, and more importantly, there is no formal arrangement for allocating these funds to local
governments and communities in mining areas. This situation portends great threats to sustainable exploitation of mineral resources in the future, because as mining activity grows, agitation for greater benefits will increase, with the potential for social tensions and crisis.
EXPECTED CHALLENGES
RESTRICTING INVESTMENT
• High global exploration costs.
– If sustained, the implication for Nigeria is that investment capital is likely to flow only in the direction of proven mineral deposits with high quality geoscience data
– Satisfying these critical investor requirements is therefore imperative to realise the potential of the sector
• Increasing significance of junior mining companies in global exploration
– Attractiveness of the sector to junior exploration companies will be very critical to mining sector growth in the coming years and highlights the importance of defining specific policies to achieve the desired levels of attractiveness
• Increasing prevalence of exploration in risky locations.
– Implies significantly unprecedented levels of international competition for Nigeria’s
mining sector, as exploration companies seem to have considerable alternatives for their investment capital
– Generally investors will find better places than Nigeria to spend their investment dollars
EXPECTED CHALLENGES
RESTRICTING INVESTMENT
• Greater focus on late stage exploration activities.
– If sustained, this trend implies potential difficulties in attracting foreign capital into grassroots exploration, which remains a fundamental problem in Nigeria
– It therefore becomes imperative that alternative scenarios for providing funds to bridge the gap in grassroots exploration in Nigeria must be thoroughly and objectively
considered
OPPORTUNITIES FOR SECTOR
IMPROVEMENT AND GROWTH
• Oil revenue and the development
– Oil revenue can be used effectively to induce development, thereby ensuring resource- led economic development through soaring economic growth, unfailing basic needs provision, development of productive human capital, dependable social and
infrastructural development and ever-expanding diversification of the national economic base
– However, there are some initial inhibitions that must be overcome for Nigeria to successfully translate its huge oil wealth into sustainable development, prominent among which are corruption, underground activities, lack of transparency, account- ability and fairness in the management of oil revenues
– What Nigeria really needs is efficient management of oil revenues and economic
diversification. There is also need to ensure that gains from oil revenue are broadly and equitably shared. These are essential for the country to successfully reduce its current over- dependence on oil, its vulnerability to oil price shocks and help reduce the youth restiveness in the Niger Delta region. Hence, oil will be a fuel not of poverty, violence or debt accumulation but of rapid and sustainable economic development
OPPORTUNITIES FOR SECTOR
IMPROVEMENT AND GROWTH
• Outlook on Demand and Production
– mineral commodities critical to the growth of Nigeria’s minerals and metals sector are:
Iron Ore/Steel Bauxite/Aluminium Coal
Lead-Zinc Bitumen Limestone Uranium
OPPORTUNITIES FOR SECTOR
IMPROVEMENT AND GROWTH
• Import substitution
– Reducing Nigeria’s importation of goods, for which natural raw materials abound locally, is seen by some as absolutely critical to growth
– The issue is that Nigeria quotes abundant resource potential (as “proven reserves”), however the confidence by the foreign investor in this potential is low
– For industrial minerals, local production does not satisfy local demand. The level of importation of products like building and construction materials, pharmaceuticals, paints, ceramics, cement, cosmetics, drilling mud, batteries, etc which are derived from minerals like gypsum, feldspar, marble, lead/zinc, granite, salt, tin, phosphate and talc remain very high
– Today, the local production of industrial minerals is <10% of local demand. This presents a large scope for import substitution and a massive potential opportunity for growth
OPPORTUNITIES FOR SECTOR
IMPROVEMENT AND GROWTH
• Development of the Steel Sector
– Despite over two decades of investment the contribution of this sector to domestic growth has remained negligible
– In the past ten years, the volume of steel consumed by the oil and gas sector is estimated at over USD5bn, with negligible contribution from locally produced steel products
– Local demand for steel products for manufacturing, construction and agriculture is forecast to rise significantly in the near future as initiatives to bridge the current infrastructure deficit gain momentum, driven primarily by investment in power and transportation
– Almost all major raw materials required for the production of steel are available locally, and the revival of the steel sector will have a multiplier effect on the exploration and exploitation of iron ore, coal, limestone, etc
